Yield Of Malaysia REITs In 2015

I am not a fan of REIT, as I'm purely looking for growth in the stock market. 

I have only invested in CMMT before, as I like Gurney Plaza and the possible acquisition of Queensbay Mall.

However, I do not rule out that I will buy REITs again in the future, as investment style will change with time.

Again, I received the table below from HLIB. I will put it up here for future reference.

It seems like popular REITs such as SunREIT & IGBREIT do not give high yield compared to peers, I think it is mainly because their share price has appreciated more than others recently.

Anyway, all still give decent yield of more than 5%.

Will investors seek shelter in REITs this year?

To know more about Malaysia's REIT, you can go to Malaysia REIT site.

Peers Comparison
Companies		Mktcap	2014	01/06/2015	52-wk	52-wk	Chgs fr	Chgs fr	FY14	FY15	FY14	FY15
		(RM'm)	chgs	(RM)	High	Low	52w High	52w low	DPS	DPS	DY	DY
					(RM)	(RM)			(RM)	(RM)
ARREIT		461.44	-15.5%	0.81	1.01	0.77	-20.3%	4.5%	0.08	0.08	9.9%	9.9%
TWRREIT		345.02	-12.1%	1.23	1.54	1.16	-20.1%	6.0%	0.12	0.12	9.8%	9.8%
AMFIRST		624.63	-9.0%	0.91	1.02	0.85	-10.8%	7.1%	0.07	0.08	7.7%	8.8%
ATRIUM		143.73	-6.9%	1.18	1.33	1.16	-11.3%	1.7%	0.09	0.10	7.6%	8.5%
UOAREIT		596.25	2.4%	1.41	1.47	1.33	-4.1%	6.0%	0.10	0.11	7.1%	7.8%
QCAPITAL		468.16	2.8%	1.20	1.21	1.00	-0.8%	20.0%	0.09	0.09	7.2%	7.7%
HEKTAR		592.94	1.2%	1.48	1.55	1.42	-4.5%	4.2%	0.11	0.11	7.6%	7.4%
YTLREIT		1317.77	0.7%	1.00	1.05	0.89	-5.2%	12.4%	0.06	0.07	6.0%	7.0%
CMMT		2504.26	5.5%	1.41	1.54	1.32	-8.4%	6.8%	0.09	0.10	6.5%	6.9%
AHP		112.00	3.2%	1.12	1.23	1.09	-8.9%	2.8%	0.07	0.07	6.6%	6.6%
ALAQAR		953.83	6.8%	1.37	1.55	1.24	-11.6%	10.5%	0.09	0.09	6.2%	6.4%
IGBREIT		4328.37	13.3%	1.26	1.35	1.12	-6.7%	12.5%	0.07	0.07	5.5%	5.8%
SUNREIT		4506.55	24.8%	1.54	1.60	1.23	-3.8%	25.2%	0.08	0.09	5.2%	5.8%
AXREIT		1628.17	25.6%	3.53	3.70	2.80	-4.6%	26.1%	0.20	0.20	5.8%	5.7%
PAVREIT		4367.12	17.5%	1.45	1.53	1.23	-5.2%	17.9%	0.08	0.08	5.4%	5.5%
KLCC		12005.46	12.8%	6.65	7.00	5.47	-5.0%	21.6%	0.33	0.35	5.0%	5.2%
Sources: Bursa, Bloomberg

Trop: Double-Blow Or Blessing In Disguise?

Both Tropicana and CMMT has mutually agreed to terminate discussion of the sale of Tropicana City Mall and Office Tower, as both parties are unable to conclude the terms of sale and purchase agreement.

Surely the de-gearing plan of Tropicana will take a slight setback. However, this may also indicates that Tropicana is not in a desperate situation to dispose its assets cheaply to cut down its debt.

The collapse of this deal surely breaks a lot of people's glasses, as Tropicana City Mall is regarded as a good fit to CMMT's portfolio. Anyway, CMMT may save its resources to acquire Queensbay Mall in Penang, which is not inferior to Tropicana City Mall.

From Tropicana's 2012 annual report, its shopping mall and office tower give a yield of 5.25-6.5% in 2012. Its long term vacancy rate stands at 5% while its long term growth in rental rates is 5-10%.

This announcement comes soon after the Budget 2014 speech. How will it affect Tropicana's share price?

At this point of time when I'm writing this post, Tropicana's share price has gone up 3 sen to RM1.44. Is it a blessing in disguise?

Singapore Buys CMMT

On 11-11-11, Government of Singapore Investment Corporation (GIC) which is chaired by Singapore's prime minister, has acquired 99,248,100 (5.64%) of CMMT's shares through private placement. This is the first time GIC holds CMMT's shares and becomes one of its substantial shareholder.

CMMT will issue 261,904,000 new shares at RM1.26 each as private placement to raise RM330 million for the acquisition of the East Coast Mall. The acquisition is said to be completed by the end of this year.

Some information regarding GIC:

GIC is one of the largest investment management organizations in the world, with over 1000 people, investing well over US$100 billion in multiple asset classes in more than 40 countries. 

We have almost 30 years of experience in publicly traded investments in more than 45 exchange traded and over–the-counter markets dealing with stocks, futures and options, fixed income, natural resources, foreign exchange, cash and derivatives.

GIC's real estate portfolio is one of the few that is truly global. We are ranked among the world's top 10 real estate investment firms in terms of assets under management.

Our private equity portfolio has placed us as one of the leading global private equity investors in the world with a network of over 100 active fund managers that are among the best in the world.

In keeping with our prudent approach to investing with a long-term horizon, we make identifying and managing risk a clear and integral part of management responsibility at all levels. We have established a framework that sets the accountability and responsibility for risk-taking to ensure we maximise our client's returns.

Our investment strategy is one of integrated diversity. There are new and unique investment opportunities which call for GIC to operate as one integrated organization while at the same time fully exploiting the range of asset class expertise and experience in-house for best investment results. We respond quickly to investment opportunities around the world with our specialists who are on the ground at our various offices, getting a good pulse of the markets.

Bursa REITs at A Glance

A lot of people may dream of being a property investor. Nevertheless, not many people can actually take their first step into property investment or even if they have started, failed to be successful.

There are a lot of obstacles in property investment: inadequate capital, inadequate personal income for loan repayment, fear of owing bank money, not willing to pay interest to bank, fear of interest rate hike, fear of buying into wrong property or location, fear of project being abandoned, fear of economy downturn, fear of property bubble, fear of trying new thing, fear of hassles and hidden cost in property transaction, fear of problematic tenants, fear of unknown etc.

I think that the ultimate goal of every property investors is to own a good commercial property which can give higher and more consistent return. As commercial property is relatively much more expensive than residential, most investors will not have the ability to own one. 

However, now everyone has an opportunity to "own" and "collect rental" for commercial properties without any hassles, through REIT (Real Estate Investment Trust). REIT is like unit trust, where you contribute any amount of money you wish to a REIT management, who will manage and maintain a few commercial properties that generate rental income. The profit will be distributed back to you according to how much money you have contributed.

REITs are considered a conservative investment vehicle which usually yield higher return compared to bond and fixed deposit. They are easy to buy and sell as they are listed in the stock market. Besides getting distribution (dividend) on a regular basis, the stock price may also rise when the REIT's income rise.

Below is the total distribution (in sen) of REITs listed in Bursa for the most recent 12 months, in 2010 and 2009. You can compare them to judge how well the REITs perform.

REIT	Last 12mth	2010	2009
AHP	7.30	7.20	7.00
ALAQAR	8.47	7.73	8.10
AMFIRST	9.42	9.75	9.75
ARREIT	7.08	7.32	7.16
ATRIUM	8.60	8.60	6.95
AXREIT	18.25	16.00	15.80
BSDREIT	10.20	10.00	9.30
CMMT	7.30	8.43	n/a
HEKTAR	10.30	10.30	10.30
QCAPITA	8.18	8.03	7.68
STAREIT	6.49	6.49	6.49
SUNREIT	6.82	6.58	n/a
TWRREIT	10.65	10.00	10.00
UOAREIT	9.70	9.97	11.50

The total distribution does not tell how much the REIT's unit holder can get in return. We need to calculate the distribution per unit to know its yield.

Which of those REITs give the best yield? A property investor usually aim for a yield or return on investment (ROI) of at least 2x FD rate. Thus, property investment yield should be around 6-7% at the moment. Most REITs listed in Bursa Malaysia do give a yield of 6-8%.

Here is a list of ROI for REITs, base on their distribution in 2010 and price on 2nd Nov 2011.

REIT	Price 2 Nov	2010	Return %
AHP	1.03	7.20	6.99
ALAQAR	1.11	7.73	6.96
AMFIRST	1.14	9.75	8.55
ARREIT	0.875	7.32	8.37
ATRIUM	1.07	8.60	8.04
AXREIT	2.52	16.00	6.35
BSDREIT	1.45	10.00	6.90
CMMT	1.32	8.43	6.39
HEKTAR	1.29	10.30	7.98
QCAPITA	1.06	8.03	7.58
STAREIT	0.86	6.49	7.55
SUNREIT	1.14	6.58	5.77
TWRREIT	1.24	10.00	8.06
UOAREIT	1.36	9.97	7.33

Of all the listed REITs above, CMMT (CapitaMalls Malaysia Trust) is the most recent addition with some interesting "activities" going on. Its yield does not seem to be attractive at the moment compared to the others.

CMMT which is the only REIT made up of purely shopping malls, is just listed in July last year. It has 3 very good shopping malls in its portfolio, which are Gurney Plaza Penang, Sungei Wang Plaza KL and The Mines Seri Kembangan. It has acquired the extension new wing of Gurney Plaza early this year and will probably add the East Coast Mall in Kuantan to its portfolio by the end of this year. The move will certainly increase CMMT's value, revenue and total distributable income.

      East Coast Mall Kuantan

However, the distribution per unit or the yield may or may not increase much as CMMT is using 100% private placement to fund the acquisition of East Coast Mall. A total of 261.9 million new units will be issued to raise RM330 million (the mall costs RM310 million). This represent 17.5% addition to its existing units which will certainly dilute its earning. The good thing is, CMMT is able to reduce its gearing and save some financial cost in the future.

CMMT mentions that East Coast Mall will contribute about RM20 million net income annually. Using the latest 2011Q3 distributable income of RM29.65 million and 1.98 sen per unit as reference, after the acquisition, CMMT will have a distributable income of RM29.65 + 5 = RM34.65 million every quarter. With its new 1497.7 + 261.9 = 1759.6 million units, its distribution per unit will be 34.65/1759.6 = 1.97 sen, which is almost the same as 1.98 sen before private placement. Please note that these are all rough calculation and assumption.

     Penang Gurney Plaza

CMMT's malls have 99% occupancy rate and are all stand-out malls in the region. Similar to all other REITs, its income can only increase when rental is raised if the market allow, or when it acquires new properties. If not, its income, yield as well as the unit price will stay stagnant, which is why many investors are not interested in REITs.